Australian CIOs direct IT budgets towards new developments

Businesses within Asia-Pacific (APAC) have increased their IT budgets year-on-year by 4.3 percent, more so than any other region in the world, outpacing the likes of North America and Europe, according to a new survey conducted by Gartner.

The survey, which captured responses of 544 CIOs from every major industry spread across 19 countries, revealed that APAC businesses are investing more heavily in digital as opposed to other businesses across the globe and that this trend is forecasted to increase in the coming years.

So where exactly are those growing IT budgets being directed? Gartner says that 73 percent of the APAC businesses’ IT budgets were still being spent on operational costs or -- in other words -- ‘keeping the lights on’ while the remaining 27 percent was being spent on transformation or innovation.

However, Australian specific data released from research firm Telsyte confirmed that IT is, in fact, the main driver in transforming organisations in Australia as opposed to more conventional IT spending.

Telsyte's Australian Digital Workplace Study 2017, which involved respondents from 420 Australian CIOs and IT decision makers, revealed that 57 percent of IT budgets are being spent on transformation or innovation programs while only 43 percent on average was being spent on running day-to-day IT operations, which contrasts Gartner’s findings from the wider APAC region.

Telsyte says that Australian CIOs are developing new products and services as the main business priority in order to combat domestic and international competition.

These transformation initiatives are largely underpinned by Business Intelligence (BI)/Analytics, cloud services and digital marketing which make up the key investment areas for businesses in 2016. Telsyte adds that 1 in 3 of respondents are intending to use robotics in some capacity and that 3D printing is gaining traction with 24 percent either using it or have exploratory projects in place.

CIO priorities aren’t likely to change in the near future either with CIOs from Gartner’s APAC survey reporting that Advanced analytics, Internet of Things (IoT) and digital security have the most potential to change their organisation over the next five years. Interestingly, APAC CIOs didn’t see augmented reality and virtual reality as having much of an impact on their business. However, Telsyte’s data says that augmented reality and mixed reality (MR) is of high interest amongst Australian businesses, with 57 percent currently using or intending to use AR/MR technology.

Gartner says that businesses’ growing interest in developing their own digital ecosystems and driving business transformation has led to APAC embracing a bi-modal structure where an IT organisation or project portfolio is explicitly split into two parts: one being more safe and predictable and the other more innovative, fast and collaborative. According to the survey, 50 percent of APAC’s IT organisations are bi-modal with CIOs citing the greater acceleration to market and ability to innovate as the driving factor in adopting the split structure.

The survey also highlighted the additional cost involved in switching to a bi-modal model particularly for large organisations. Technical debt, cultures of haves and have nots and additional head count were emphasised as the main cost hurdles.

Overall, CIOs cited skills availability as the main barrier to success for their business -- an issue that was, interestingly, more pervasive than management culture, attitude and money. Business intelligence and analytics skills were particularly in short supply, however CIOs also noted that they were struggling to find digital marketing talent in APAC specifically.

Gartner’s survey also found that the top performing CIOs were spending more on innovative digital-centric business initiatives in contrast to the trailing performers, who were doing the opposite and spending their IT budgets largely on running day-to-day services and optimising IT costs. However, it did note that the top performers tended to be better at managing the resources they actually have and, hence, were given more resources to create value with, as opposed to the trailing performers who struggle to achieve their cost reduction target in the first place.

The leading CIOs also tended to develop critical digital components in-house as opposed to buying components from vendors. Gartner observed how this approach honed the organisations’ skills.

“They become very good at creating the future if they get a better opportunity to practice a couple of times,” says Gartner’s Research Director, Andy Rowsell-Jones.

Leaders instead preferred to engage with startups while poor performers ignored them. Gartner urged companies and government units to look outside of their normal procurement panels and engage with smaller unconventional companies as a source for key technology capability and skills.